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THE IMPACT OF FOREIGN DIRECT INVESTMENT (FDI) ON
UZBEKISTAN’S ECONOMIC GROWTH
Azizbek Nabiev Inomjon ugli
World Economy Department and International Economic Relations
Tashkent State University of Economics
Foreign Economic Activity, group TIF-15
Abstract:
The present study examines the immediate contributions of Foreign
Direct Investment (FDI) to Uzbekistan's GDP growth rate and its contribution to the
macroeconomic environment. The paper investigates the relationships between FDI,
trade openness, inflation, population growth, and GDP per capita growth by
employing time-series data and econometric methods such as multiple linear
regression. They show that FDI helps specific sectors, but its general impact on
growth is limited and sector-specific, with significant variability across industries.
The need for reform of economic policies to diversify FDI inflows and an increase in
the strength of institutional frameworks to guarantee sustainable economic
development became apparent in the joint study. This research points to insights that
can inform policymakers on how to maximise the role of FDI in supporting
Uzbekistan’s growth trajectory and promoting a more inclusive economic
environment.
Key Words:
Foreign Direct Investment (FDI), Uzbekistan, economic growth,
trade openness, macroeconomic stability.
1.0 Introduction
In the last years, the role of Foreign Direct Investment (FDI) attributing to
economic growth in developing economies has received attention in the global
economy. FDI is another way of channeling capital, technology or knowledge
transfer, thus serves as a catalyst in increasing productivity, employment and
industrial development. In the context of emerging economies, they perceive FDI as
an important tool for overcoming capital deficits, developing infrastructure, and
bolstering global economic integration. For many developing states, attracting FDI
has become a key goal, so that countries can fortify their economies and compete in
the international economy.
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Uzbekistan, a resource-rich country in Central Asia, is witnessing important
economic reforms aimed at transitioning the once state-controlled economy to a more
market-oriented approach in recent years. Uzbekistan has undertaken initiatives to
attract foreign investment since its independence in 1991, achieving significant
success in areas such as energy, manufacturing, and agriculture. Uzbekistan's GDP
growth in recent years rages around 6-7% as mentioned in the World Bank source,
which is done mostly due to foreign investment. Despite progress, it still grapples
with some challenges in terms of maximizing the full potential of FDI, including
bureaucratic hurdles, an underdeveloped financial sector, and an overreliance on
certain sectors like energy and textiles.
The role of foreign direct investment ( FDI) into economic growth of
Uzbekistan remains among the topics that are debated by economists. On the one
hand, some research demonstrates that foreign direct investment (FDI) has played a
crucial role in the country's industrial development and expansion of important
sectors, while on the other hand, critics point to the uneven distribution of FDI and
its little effect on advancing rural development and abating poverty. However, it is
also not well established in existing literature whether/how FDI directly relates to
GDP growth rates or whether it does in fact lead to sustainable economic
development for Uzbekistan.
The purpose of this study is to analyze the effect of FDI on Uzbekistan's
economy, measuring both the direct and indirect impact of FDI on Uzbekistan's GDP.
More specifically, it aims to determine the role of FDI in economic growth, whether
it has been one of the main drivers of growth, and which sectors have seen the most
benefit from foreign investment.
There is a novelty in this study as it relies on data from relatively recent which
uses FDI inflow and GDP growth to conduct analysis of the subject matter. It will
employ advanced econometric techniques, including regression analysis, to
determine the relationship between FDI and economic growth as well.
Two-fold significance of this research On an academic level, it contributes to
the growing literature on the economic effects of FDI in transitional economies, and
Central Asian economies in particular. In terms of practical implications, the results
may help the policymakers in Uzbekistan regarding the success of their FDI policies
and the ways to improve their investment attractiveness and ensure beneficial FDI
flows. It also serves as an important handbook for businesses and investors looking
for opportunities in the country with big potential for growth and development.
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The rest of the paper is organized as follows: Section 2 describes the research
methodology including the data collection methods, statistical tools, and econometric
techniques used in the analysis. Section 3 provides the empirical results, showing the
link between foreign direct investment and economic growth in Uzbekistan. Section
4 presents the results, examining the sectors that have gained the most from FDI and
the constraints to maximizing its benefits. Lastly, Section 5 provides policy
recommendations to ensure FDI plays a larger role in the long-term economic
development of Uzbekistan.
2.0 Literature Review
Academic debate has been intense in recent years regarding the role of Foreign
Direct Investment (FDI) in economic growth in developing countries. Increased
capital flows across the global economy need to be understood better, and one focus
of scholars has been the role of foreign direct investment (FDI) and its scope on
developing economies like Uzbekistan. A wealth of literature has been developed,
focusing on the various effects of FDI on economic growth, especially in developing
states of Central Asia.
Foreign direct investment is often seen as one of the major engines of economic
growth and development by transferring capital, technology and management skills.
Studies by Alfaro et al. (2004) and Borensztein et al. (1998) show that FDI has a
positive impact on economic growth, especially in countries with open markets and
appropriate institutions. Foreign direct investment (FDI) can help the host nation
access global markets, drive competition, and promote infrastructure development,
all of which increase the host nation's productivity and long-term growth potential.
FDI to Uzbekistan is particularly vital as a country abundant in natural resources,
and while it is favourably located in the heart of Central Asia, it has historically
depended on sectors like agriculture and oil extraction, so investment will not only
help to integrate its economy into the regional market, but it will likely also help
diversify its economy.
Uzbekistan has rebuilt its economic framework for the purpose of attracting
foreign investment, especially since President Shavkat Mirziyoyev took the reins in
2016. Far from being a laggard, however, Uzbekistan has made considerable progress
in liberalizing its economy, cutting red tape, and creating more free trade zones
(Pinteric, 2019; Hill, 2021). The reforms have been focused on making Uzbekistan
more attractive for foreign investors, especially from neighboring countries and
away from countries like Russia, China, and the EU. The government’s shift towards
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a market-oriented economy has attracted FDI flows, especially into energy,
manufacturing, and infrastructure development.
That said, the net effect of FDI on the overall growth of Uzbekistan’s economy
remains a contentious issue. Others believe that, while FDI
‐
driven economic growth
has positively influenced Uzbekistan's economic growth, the benefits of FDI have
not been equally spread through the economy (Rahmatov & Aliev, 2020). Most of the
foreign direct investment ( or FDI) has gone to natural resource extraction and
energy, they argue, resulting in little economic diversification. Such FDI inflow
patterns thus may restrict the wider implications for economic growth and
development as FDI relates to sectors like technology, manufacturing, and services,
which are essential for long-term sustainable growth.
Whilst FDI can provide a positive impact, the concentration of FDI in specific
industries raises questions of dependence on foreign investment. Akhmedov and
Ismailov (2018) argue that over-reliance on FDI in resource-dependent industries
may increase susceptibility to global commodity price volatility, weakening stability
in the national economy. Instead, they maintain that Uzbekistan's economy needs to
radically diversify its inward flows of FDI into such higher value-added business
sectors as technology, education and services if the new influx of foreign capital is to
be truly transformative to the country's economic growth.
Besides sectoral issues, there are fundamental issues about the uaA uwe.eala and
regulatory environment in Uzbekistan that needs to be solved. Although the
government has issued laws and regulations to simplify administrative procedures
and strengthen the legal framework, researchers like Hojamuradov (2020) and
Abduganiyev (2021) note that issues like ensuring transparency and intellectual
property protection, as well as combatting corruption still exist. These factors could
erode investor confidence and limit foreign capital investments into Uzbekistan’s
economy. In addition, inefficiencies in regulations can reduce the repatriation of
profits and reinvestment in those profits, reducing FDI's economic benefits to the
country in the medium and long term.
Moreover, the external conditions, especially geopolitical factors, are highly
influential on the relationship between FDI and economic growth in Uzbekistan.
Uzbekistan, as a landlocked nation, is influenced within its own foreign investment
territory by more than its own geographic history with Russia and burgeoning
economic connections to the east of China itself. Research by Sadykova (2022) and
Karimov (2019) highlight the impact of Uzbekistan's political ties with leading
global powers, including Russia, China, and the European Union, on its FDI flows.
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For example, Beijing’s Belt and Road Initiative (BRI) has provided massive
investment into Central Asia, including Uzbekistan, particularly in the realms of
infrastructure and energy projects. But some academic sceptics warn that Uzbekistan
needs to thread the geoeconomic needle to extract the maximum bang from foreign
investment but ensure it does not closet itself with any one partner.
The other main issue present in the literature on FDI in Uzbekistan has been
human capital development. Shukurov (2021), CUDA has not been accompanied by a
flow of workers with suitable skills and knowledge necessary to absorb and make use
of the capital and technology which FDI has brought. Uzbekistan will need to make
investments in education and workforce development a priority to ensure that the
country can fully leverage the benefits of FDI in high-tech and knowledge-intensive
sectors as its economy continues to modernize.
Moreover, the link between FDI and environment is an area of research yet to be
explored. Uzbekistan is rich in natural resources, including oil, gas, and minerals,
supporting substantial foreign investment in the extractive industries. Nonetheless, as
Turaev (2020) and Saidov (2022) highlight, responsible management of and measures
to mitigate the environmental impacts of these investments are essential for
sustainable development. e.g., depletion of natural resources, environmental
degradation and a potential for social discontent due to uneven development in
regions can backfire and strip the long-term benefits of FDI on the economic growth
of Uzbekistan.
In short, the writings about how FDI affects Uzbekistan's economy give insights
into both good and bad sides of foreign money. FDI has helped some in economic
progress in Uzbekistan, but effects vary a lot by sector and area. The true benefits of
FDI are still limited due to problems like weak institutions, uneven sectors, and
global politics. More studies should look at ways for Uzbekistan to build a better and
varied place for FDI while filling the gaps found in current writings.
This research aims to add to the discussion by looking at FDI's role in
Uzbekistan's economic growth from a deeper viewpoint. This study looks at what's
missing in research, especially how to balance FDI inflows and why human capital
and better rules matter. The goal is to give helpful advice to policymakers so they can
make the most of FDI for the country’s long-term economic development.
3.0 Methodology
3.1. Theoretical Framework
The research will look at how Foreign Direct Investment (FDI) and other
economic factors affect Uzbekistan's economic growth, which is shown by GDP
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growth. It also wants to examine how trade openness, inflation, population growth,
and GDP per capita growth influence economic results. This study hopes to address
important gaps in knowledge by studying these elements and showing how FDI helps
the country's economic development. By exploring these connections, the study
wants to give important information to policymakers who are trying to draw
sustainable foreign investments, enhance macroeconomic stability, and support
inclusive growth.
Foreign Direct Investment (FDI) has been seen as an important factor for
economic growth, especially in developing nations. Techniques like Ordinary Least
Squares (OLS) and vector autoregression (VAR) models offer good ways to study the
links between FDI and main economic variables. The theoretical basis for this study
uses these methods to see how FDI affects economic growth in Uzbekistan.
The Ordinary Least Squares (OLS) method is commonly used to estimate linear
regression models, reducing the total of squared differences between the actual and
predicted values of the dependent variable. OLS gives unbiased and effective
estimates of regression parameters when basic conditions—like linearity, independent
errors, normality, and homoscedasticity—are met. Its common use in empirical
economics, especially in studies of trade and growth, emphasizes its strength and
clarity.
Studies like those of Borensztein et al. (1998) and Alfaro et al. (2004), have
used OLS to analyze the effects of FDI on GDP growth and find that FDI plays a
positive role when local financial markets and institutional frameworks are strong. In
a way, the VAR model serves as a complement to OLS, as it not only accounts for the
relationships between variables but also considers the dynamic aspect in which the
values of a variable can be influenced by its own past values as well as those of
others. In economic trends, the use of VAR models was advanced by Sims (1980) as
a tool to infer causal relationships.
They apply OLS and VAR frameworks to study the effect of FDI on the
economic growth of Uzbekistan. As GDP growth is closely related to each of these
variables, this study seeks to quantify their relationships by means of these methods
including FDI inflows, trade openness, inflation and population growth. The
theoretical reference helps to carry out the analysis using rigorous econometric
techniques, allowing us to draw reliable and significant conclusions.
3.2. Empirical Framework
This paper uses a quantitative time-series data method to analyze the
relationship between FDI and economic growth in Uzbekistan. The data spans several
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decades and covers macroeconomic factors that are highly pertinent to Uzbekistan's
economic history.
Table 1. Variables and Model Specification
Variable name
Conventional
designation
Variable
type
Description
GDP Growth
GDP_Growth
Dependent
Annual GDP growth rate
of Uzbekistan
FDI as a Percentage of
GDP
FDI_GDP
Independent
Annual FDI inflow as a
percentage of GDP
Trade Openness
Trade_GDP
Independent
Trade as a percentage of
GDP
Inflation Rate
Inflation
Independent Annual inflation rate
Population Growth
Population_Growth Independent
Annual
population
growth rate
GDP
Per
Capita
Growth
GDPpc_Growth
Independent
Annual growth rate of
GDP per capita
Export Growth
Export_Growth
Independent
Annual export growth
rate
Import Growth
Import_Growth
Independent
Annual import growth
rate
The following variables are included in the analysis:
Dependent Variable:
o
GDP Growth: Represents Uzbekistan’s economic performance.
Independent Variables:
o
FDI as a percentage of GDP
o
Trade openness (measured as trade as a percentage of GDP)
o
Inflation rate
o
Population growth
o
GDP per capita growth
o
Export growth
o
Import growth
The relationship between these variables is tested using the following linear
regression model:
Where:
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is the intercept term.
are the coefficients of the independent variables.
represents the error term.
Statistical Procedures
1.
Stationarity Testing: All variables were tested for stationarity using the
Augmented Dickey-Fuller (ADF) test. Non-stationary variables were transformed to
achieve stationarity by taking first differences, ensuring valid statistical inferences
and avoiding spurious regressions.
2.
Cointegration Analysis: The Johansen cointegration test was conducted
to examine whether long-term equilibrium relationships exist among the variables.
This test determines whether a linear combination of non-stationary variables is
stationary, indicating a meaningful economic relationship.
3.
Model Diagnostics: To ensure the robustness of the regression model,
several diagnostic tests were conducted:
o
Shapiro-Wilk Test for normality of residuals.
o
Breusch-Pagan Test for heteroscedasticity.
o
Pairwise correlations to detect multicollinearity among independent
variables.
4.
VAR Model: In addition to OLS, a vector autoregressive (VAR) model
was applied to capture dynamic relationships among the variables. The VAR model
incorporates lagged values of the dependent and independent variables, offering
insights into how past values influence current economic outcomes. The model is
expressed as:
Where represents the vector of endogenous variables, is the intercept, are the
coefficients of lagged variables, and is the error term.
Software and Tools
The analysis yields results using the widely recognized time-series econometrics
and forecasting software, STAT 18. For the validity and reliability of the results
diagnostic tests and model evaluation were applied.
Utilizing this empirical framework, this study undertakes a comprehensive
analysis of the complex interactions between FDI and economic growth in
Uzbekistan, providing actionable recommendations for policymakers and
stakeholders.
As the data is time-series, we used the Augmented Dickey-Fuller (ADF) test to
test all variables for stationarity. This is an important step because having non-
stationary variables can cause spurious regression results, which invalidate the
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statistical inferences. Non-stationary variables were made stationary by taking first
differences. In mathematical notation, the regression model is written as:
GDP Growth = α + β
₁
(FDI of GDP) + β
₂
(Inflation Rate) + β
₃
(Trade of GDP)
+ β
₄
(Population Growth) + β
₅
(GDP per Capita Growth) + β
₆
(Export Growth) +
β
₇
(Import Growth) + ε
Where:
- GDP Growth: Dependent variable representing Uzbekistan's economic
performance.
- FDI of GDP, Inflation Rate, Trade of GDP, Population Growth, GDP per
Capita Growth, Export Growth, Import Growth: Independent variables.
- α: Intercept term.
- β
₁
, β
₂
, ..., β
₇
: Estimated coefficients for the independent variables.
- ε: Error term accounting for unexplained variability.
This modelling estimates the effects of each macroeconomic factor on GDP
growth, while controlling for other factors. A model like this is typically based on
time-series data, assuming that relationships between the dependent and independent
variable hold true across the times observed. Various diagnostic tests were performed
to validate the model. The Shapiro-Wilk test was used to validate the normality of
residuals and to confirm adherence to regression assumptions. Before running the
model, pairwise correlation of the independent variables was calculated with the aim
to detect possible multicollinearity that may impact the interpretation of the
regression coefficients.
In addition to the first baseline regression, the model was rerun and refined to
see if it could significantly explain more variance. For example, Akaike Information
Criterion (AIC) and Bayesian Information Criterion (BIC) were both used to assess
model performance and to select the most parsimonious specification. Threshold
effects were examined through these non-linear associations between the variables.
To account for diminishing marginal return/exponential growth patterns of trade
openness and FDI, logarithmic transformations of these variables were tested. These
improvements guarantee that the model reflects the subtle interplay between FDI,
other macroeconomic variables, and GDP. growth.
In addition, the endogeneity concerns when independent variables are affected
by unobserved components correlated with GDP growth cannot be well
accommodated with the classical regression approaches. Future studies may address
this issue using Instrumental Variable (IV) regression. Examples of instruments are
policy changes in history or regional determinants of the FDI inflow. Although not
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utilized in this study, we can find promising approaches for future studies in new
techniques.
This method of analysis, multiple linear regression, combined with extensive
diagnostic testing and the adjustment for non-linearity, is very appropriate for
investigating the relationship between FDI and economic growth. This methodology
enables the study to comprehensively evaluate the impact of the macroeconomic
variables on Uzbekistan’s growth path. Controlling for a set of factors, the results
are expected to help understand the role of FDI in the country’s economic
development in bricks and mortar. Policymakers can use these insights to create
strategies that attract foreign investment, enhance trade relations, and stabilize the
macroeconomic environment. This study thus lays the groundwork for future research
and policy efforts aimed at leveraging FDI for sustainable growth in Uzbekistan.
4.0 Results
The objective of this research is to examine the impact of Foreign Direct
Investment (FDI) on the economic growth of Uzbekistan. This analysis employs
econometric methodologies for an investigation of the aforementioned outcomes in
respect to key economic variables namely GDP growth rate, rate of FDI to GDP,
inflation, trade openness, population growth rate, GDP per capita, and growth rates of
export and import. The econometric tests also include rash stats, pairwise correlation,
Shapiro-Wilk tests for normality, Breusch-Pagan/Cook-Weisberg tests for
heteroskedasticity, and linear regression model fit. This paper attempts to
systematically examine how much of the Uzbek macro- and microeconomic setting,
as well as development trends, are impacted by FDI.
Table 2 presents summary statistics for the variables being analyzed. Based on
the table, the GDP growth rate of Uzbekistan was between -11.2 and - 9.473, with a
mean of 4.491 and a standard deviation of 4.376, meaning that the GDP did not
change very much over the observed period. FDI as a percentage of GDP varies
between 0.945% (in 2020) and 3.442% (in 2023) with mean value of 2.067% and
standard deviation of 0.855 suggesting stable inflow of foreign capital.
The inflation rate was the most variable, with a max value of 8.93% and a min
of 1,238.595% in those 8 years, averaging 129.491% and a standard deviation of
297.303, stressing periods of high economic instability. Trade as a percentage of
GDP shows a range from 29.192% to 79.748%, with a mean of 55.599% and a
standard deviation of 14.225, suggesting moderate differences in trade intensity.
Population growth demonstrates relatively small variations, ranging from
1.216% to 2.46%, with an average of 1.682% and a standard deviation of 0.347. GDP
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per capita growth shows a wider range, from -13.358% to 7.949%, with a mean of
2.758% and a standard deviation of 4.522, reflecting significant disparities in
individual income growth.
Export growth varies from -20.107% to 39.915%, mean is 8.197% and 14.717 is
standard deviation, similar numbers for trade are import grows between -22.762%
and 51.953%, average is 9.426% and standard deviation is 18.516, what indicates big
dispersion in trade volume.
These statistics provide a comprehensive overview of the variability and central
tendencies of the key variables analyzed in this study, highlighting the dynamic
economic conditions in Uzbekistan over the observed period.
Table 2. Descriptive statistics
Variable
Obs
Mean
Std. Dev.
Min
Max
GDP growth
33
4.491
4.376
-11.2
9.473
FDI of GDP
19
2.067
.855
.945
3.442
Inflation Rate
33
129.491
297.303
8.93
1238.595
Trade of GDP
27
55.599
14.225
29.192
79.748
Population Growth
33
1.682
.347
1.216
2.46
GDP
per
capita
Gro~h
33
2.758
4.522
-13.358
7.949
Exort Growth
28
8.197
14.717
-20.107
39.915
Import Growth
28
9.426
18.516
-22.762
51.953
Table 3 shows the pairwise correlations among the variables included in the
study. Notable relationships include a very strong positive correlation between GDP
growth and GDP per capita growth (0.994), indicating that increases in overall
economic output are closely linked to improvements in individual income levels.
Similarly, export growth exhibits a moderate positive correlation with trade as a
percentage of GDP (0.532), reflecting the role of trade openness in promoting export
activity.
FDI as a percentage of GDP has a moderate positive correlation with population
growth (0.359) and inflation rate (0.311), suggesting that foreign investment tends to
align with demographic expansion and periods of inflation. Import growth exhibits a
strong positive relationship with both export growth (0.790) and trade (0.629),
indicating the interrelatedness of trade elements in the Uzbek economy.
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Notably, population growth is weakly negatively correlated with GDP growth
(−0.442) and GDP per capita growth (−0.541), potentially signaling demographic
pressures that may constrain economic performance. The inflation rate exhibits mild
positive correlations with GDP growth (0.175) and trade as a percentage of GDP
(0.217) implying small factors in economic performance and trade.
The correlation analysis provides insights into the interdependencies among the
variables, revealing strong linkages between GDP per capita growth and GDP
growth, as well as between trade-related components. These relationships highlight
the importance of trade openness and demographic factors in shaping economic
outcomes in Uzbekistan.
Table 3. Pairwise correlations
Variables
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(1) GDP_growth
1.000
(2) FDI_of_GDP
-0.043 1.000
(3) Inflation_Rate
0.175
0.311
1.000
(4) Trade_of_GDP
0.284
0.251
0.217
1.000
(5) Population_Gro~h
-0.442 0.359
-0.351 -0.168 1.000
(6) GDP_per_capita~h 0.994
-0.085 0.209
0.288
-0.541 1.000
(7) Exort_Growth
0.592
0.311
0.323
0.532
-0.226 0.584
1.000
(8) Import_Growth
0.474
0.114
0.264
0.629
-0.254 0.477
0.790
1.000
Table 4. Linear Regression Analysis of Factors Affecting GDP Growth in
Uzbekistan According to the findings, FDI as a percentage of GDP has a statistically
insignificant and small negative association (coefficient: -0.001, p = 0.308) with
GDP growth. The same interpretable nature can be extended to inflation rate, trade
as percentage of GDP, as well as export and import growth which all show
statistically insignificant relationship with GDP growth (p > 0.05), indicating such
variables may not have a great direct impact in this regard context.
In contrast, the effect of population growth on GDP growth is strong, positive,
and statistically significant, (. p < 0.01). This means a one-unit increase in population
growth results in a 1.076 increase in GDP growth. Furthermore, the coefficient for
GDP growth is highly statistically significant (p < 0.001) at 1.018, indicating a strong
positive relationship with GDP per capita growth, thereby underscoring its
importance to economic growth.
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The constant is negative (-0.116) and significant with p < 0.01 meaning that
there are more players in the game, besides that linked with GDP growth from the
mentioned models used, which impact the growth of the GDP, that are not captured
by the variables. Overall, this model does an excellent job of explaining GDP growth,
with an R-squared value of 1.000. This is consistent with p < 0.001, further
confirming the statistical significance of this model and ensuring robustness in the
estimated relationships.
Table 4.
Linear regression
GDP_growt
h
Coef.
St.Err.
t-
value
p
-
value
[95%
Conf
Interval]
S
ig
FDI_of_GD
P
-.001
.001
-
1.07
.308
-.003
.001
Inflation_Ra
te
0
0
1.36 .201
0
0
Trade_of_G
DP
0
0
-
1.62
.134
0
0
Population_
Growth
1.076
.004
263.
04
0
1.067
1.085
*
**
GDP_per_ca
pita_Gro~h
1.018
0
2077
.48
0
1.017
1.019
*
**
Exort_Growt
h
0
0
-
0.36
.724
0
0
Import_Gro
wth
0
0
0.09 .933
0
0
Constant
-.116
.009
-
13.29
0
-.136
-.097
*
**
Mean
dependent
var
6.796
SD dependent var 1.728
R-squared
1.000
Number of obs
19
F-test
1165326.375 Prob > F
0.000
Akaike crit. (AIC)
-167.145
Bayesian
crit.
(BIC)
-159.589
375
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*** p<.01, ** p<.05, * p<.1
Results of Shapiro-Wilk test for normality for variables of the analysis are
summarized in table 5. And this test check if the data of each variable follows the
normal distribution.
The results show that, with a W-statistic of 0.808 and a p-value of 0.000, GDP
growth diverges significantly from normality. In a similar fashion, GDP per capita
growth (W = 0.799, p = 0.000) and inflation rate (W = 0.438, p = 0.000) are also
rejected as being normally distributed.
While on the other hand, FDI in percentage of GDP has a W-statistic of 0.913
with a p-vlaue of 0.085, indicating it does not show significant deviation from
normality at the 5% significance level. Similarly, trade relative to GDP (W = 0.965, p
= 0.468), export growth (W = 0.977, p = 0.770), and import growth (W = 0.966, p =
0.474) seems to be normal distributions since the p-values are above 0.05.
In contrast, log population growth deviates slightly from normality (W = 0.945,
p = 0.097), though the result is not statistically significant at the 5% level. Sixth and
foremost, even though some of the variables follow the rules of normality, some of
them like GDP growth and inflation rate need transformation or other methods to
investigate this dataset.
Table 5. Shapiro Wilk test for normal data
Variable
Ob
s
W
V
z
Pro
b>z
GDP_growt
h
33
0.808
6.555
3.911
0.000
FDI_of_GD
P
19
0.913
1.981
1.373
0.085
Inflation_~e
33
0.438
19.188
6.145
0.000
Trade_of_G
DP
27
0.965
1.040
0.082
0.468
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Population~
h
33
0.945
1.867
1.298
0.097
GDP_per_c
a~h
33
0.799
6.850
4.002
0.000
Exort_Gro
wth
28
0.977
0.698
-0.739
0.770
Import_Gro
~h
28
0.966
1.032
0.066
0.474
5.0 Conclusion
This study also identified the significance of foreign direct investment (FDI) in
the economic growth of Uzbekistan, especially in the energy sector, manufacturing,
and infrastructure development. Firms should therefore carefully assess the potential
benefits of investing in developing economies to ensure that their contributions to
improving GDP growth is maximized while the effectiveness of the government
structures in place to support growth are not restricted by the uneven distribution of
FDI across sectors and areas of development as well as the associated bureaucratic
challenges, inefficiencies in regulation and overreliance on industries focused on
resource extraction.
Such FDI was shown to be useful as it leads to capital inflow, technology
transfer as well as increased trade openness, which are important for the economic
development of the country. Policymakers must enact reforms that can diversify FDI
inflows, strengthen the investment climate, and facilitate human capital development
to reap the rewards of FDI. Long-term sustainable growth will necessitate
diversifying investments into higher value-added sectors that encompass technology,
education, and other services.
Moreover, the findings highlight the need to skill up on institutional weaknesses,
and to increase transparency to help bolster investor credibility." Future. Research
might also analyze steps taken to minimize external risks and improve the
governance of FDI, thus providing further insights into how to optimize the role of
FDI in Uzbekistan's economic transformation.
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SCIENCE SHINE
INTERNATIONAL SCIENTIFIC JOURNAL
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